Consolidated profit for the first semester 2006 grew by 56% toˆ 289 million. Return on equity improved significantly to 25.7 per cent. Cost/income ratio decreased to 57.9 per cent. Focused expansion of the network through the acquisitions of Impexbank in Russia and eBanka in the Czech Republic. Retail Customers generated a clearlyhigher profit contribution of 30 per cent. Major increase of results in Southeastern Europe and the CIS.
Raiffeisen International Bank-Holding AG, which is part of theRaiffeisen Zentralbank Oesterreich AG (RZB) Group, recorded a stronggrowth of its profits during the first semester 2006. The consolidatedprofit (after taxes and minorities) for the first six months of the yearamounted toˆ 289.2 million, which is an increase of 55.6 per cent (1-6/2005: ˆ 185.8 million). For the period under review, the profit before tax amounted to ˆ 421.0 million (1-6/2005: ˆ 273.3 million, plus 54.0%), and the profit after tax was ˆ 333.5 million(1-6/2005: ˆ 221.1million, plus 50.9%). Earnings per share went up by ˆ 0.61 to ˆ 2.03 (1-6/2005: ˆ 1.42). All figures are based on International Financial Reporting Standards (IFRS).
Once again the best quarterly result in the Group''s history
With a consolidated quarterly profit (after tax and minorities) ofˆ 165.0 million, which Raiffeisen International records for the second quarter 2006, the company achieved the best quarterly result in its history. This tops the result for the first quarter 2006 (ˆ 124.2 million), which had previously been the best result, by 32.9 per cent. For the same period of the expired business year, the result amounted to ˆ 93.0 million; the growth is therefore 77.4 per cent on a yearly basis. The quarterly profit before tax amounted to ˆ 227.2 million, which is an increase of ˆ 33.3 million (plus 17.2 per cent) over the first quarter 2006 and a growth of ˆ 87.2 million (plus 62.3 per cent), compared to the same quarter of the previous year.
Herbert Stepic, CEO of Raiffeisen International, explained the newrecord result by saying,"We continued our growth strategy withconsistency, especially in the CIS and Southeastern Europe. The verygood mid-year result confirms our position on these promising markets.We are benefiting from the fact that they have the biggest pent-updemand for financial products and that we began to serve this demandearlier than other banks. This is above all true for retail banking,which shows an increase in its result of more than 120 per cent."
During the first half of 2006, Raiffeisen International acquired JSCImpexbank in Russia and thus became the biggest international bankinggroup on the Russian market, which has a strong growth potential withits more than 140 million inhabitants. Impexbank was first consolidatedinto the Group on 1 May 2006. At the end of July, the acquisition ofeBanka a.s. was announced. With this entity, Raiffeisen Internationalwill expand its customer base in the Czech Republic by more than 70 percent to about 300,000. The legally effective completion of the deal(closing) is expected for the next months.
Further expansion of volume– balance sheet total rises by 14 per cent
Raiffeisen International has exploited the strong demand for bankproducts on the Central and Eastern European markets with consistencyand expanded its customer business significantly. Loans and advances tocustomers grew by 17.4 per cent toˆ 29.0 billion, as compared to year-end 2005, and deposits from customers showed an increase of 12.7 per cent to ˆ 28.0 billion. The balance sheet total for the first semester 2006 grew by 13.9 per cent or ˆ 5.6 billion to ˆ 46.3 billion; two thirds of this increase is due to organic growth.
Further expansion of distribution network, number of customers exceeds11 million
"Also during the first half of 2006, we have stepped up the expansion ofour branch network and broadened our local presence organically by 78outlets", said Martin Gruell, CFO of Raiffeisen International. Inaddition, there are the 204 business outlets that Impexbank contributedto the network. As a result, the total number of business outletsamounted to 2,725 (2005: 2,443), which represents an increase by 282 or11.5 per cent.
The number of employees grew primarily on account of the Impexbankacquisition (5,414 staff members) and amounted to 50,513 (2005: 43,614).At mid-year 2006, Raiffeisen International serviced a total of 11.3million customers with its banking network. This constitutes a rise of1.6 million, as compared to year-end 2005.
Strong profit growth in the Retail Customers segment
In addition to segments according to regions, Raiffeisen Internationalalso divides its business according to customer segments. During theperiod under review, the Retail Customers1segment recorded thestrongest growth in profit (122.1 per cent). With an amount ofˆ 128.4 million (1-6/2005: ˆ 57.8 million), it already contributed 30 per cent (1-6/2005: 21 per cent) to the pre-tax result. ROE before tax therefore improved considerably to 25.1 per cent (1-6/2005: 17.1 per cent). The cost/income ratio sank to 71.2 per cent (1-6/2005: 77.7 per cent).
The Corporate Customers2segment recorded a pre-tax profit for theperiod ofˆ 238.7 million (1-6/2005: ˆ 155.8 million), which is an increase of 53.2 per cent, and it contributed 57 per cent to the pre-tax result (1-6/2005: 57 per cent). ROE before tax went up to 31.5 per cent (1-6/2005: 27.0 per cent), and the cost/income ratio improved to 35.8per cent (1-6/2005: 40.7 per cent).
Transformation of Bank Aval fully on schedule
On 1 June 2006, Raiffeisen International signed an agreement withHungarian OTP Bank Ltd. regarding the sale of JSCB RaiffeisenbankUkraine. The closing of this transaction is still forthcoming, and theproceeds from this sale, amounting toˆ 650 million, are not yet contained in the present results. JSPP Bank Aval, which was bought in October 2005, was consolidated into the Group''s results for the first time for a full reporting period. The transformation measures, which serve to achieve the complete integration (adaptation of systems, implementation of uniform Group standards) of one of Ukraine''s leading retail banks into the Group, are fully on schedule. Bank Aval has 1,342 business outlets. With the sale of Raiffeisenbank Ukraine, costs for a merger with Bank Aval, which would otherwise be necessary, will not be incurred. In addition, this accelerates Bank Aval''s transformation process. The brand name Raiffeisen was not part of the transaction, but will become part of Bank Aval''s name. In the future, it will sign as Raiffeisen Bank Aval.
As Raiffeisen International is no longer participating in theprivatization process for Romanian Casa de Economii si Consemnatiuni(CEC), it will fully focus on the organic growth of Raiffeisen BankS.A., which has a balance sheet total ofˆ 3,193 million and a market share of about 8 per cent and is thus the third-largest bank in Romania. Until year-end 2008, its branch network, which currently comprises 227 outlets, is to be expanded to 350 branch offices.
The Raiffeisen International management expects strong earnings growthfor the medium term in the CIS countries and above all in Ukraine andRussia. However, restructuring measures in Ukraine and Russia, due tothe acquisition of Bank Aval and Impexbank, will burden earnings in theshort term. Raiffeisen International continues to judge the potentialfor the countries of Southeastern Europe optimistically, but somewhatmore cautiously because of restrictions on credit growth prescribed bysupervisory authorities. In Central Europe, the company is increasinglyfocusing on the fast-growing segment of asset management and insuranceproducts in addition to traditional business.
By management''s estimates, the balance sheet total will grow by at least20 per cent annually in the period to 2008. We see the strongestincreases in the CIS countries, partly because of the acquisitions madethere. In view of the positive business development in the past fewmonths, the management expects consolidated profit for 2006 of at leastˆ 500 million, excluding the gain from the sale of Raiffeisenbank Ukraine.
1The Retail Customers segment comprises business activities withprivate individuals, self-employed persons, as well as small andmedium-sized enterprises with annual sales of generally less thanˆ 5 million.
2The Corporate Customers segment comprises business activities withmedium-sized and large companies in Central and Eastern Europe, but alsowith companies from other countries, especially multi-national groupsthat operate in the region.
Raiffeisen International operates one of the leading banking networks inCEE with subsidiary banks and leasing companies in 16 markets. More than11 million customers are attended to through more than 2,700 businessoutlets. Representative offices in Lithuania and Moldova complement theGroup''s presence in the region. Raiffeisen International is a fullyconsolidated subsidiary of Raiffeisen Zentralbank Oesterreich AG (RZB),which owns 70 per cent of the common stock. The remaining 30 per cent isfree float, the shares are traded on the Vienna Stock Exchange. RZB is aleading corporate and investment bank in Austria and the centralinstitution of the Austrian Raiffeisen Banking Group, the country''slargest banking group.
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